The error-in-rejection probability of meta-analytic panel tests
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Date
2006-12-15T11:17:40Z
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Abstract
Meta-analytic panel unit root tests such as Fisher’s Chi^2 test, which consist of
pooling the p-values of time series unit root tests, are widely applied in practice.
Recently, several Monte Carlo studies have found these tests’ Error-in-Rejection
Probabilities (or, synonymously, size distortion) to increase with the number of
series in the panel. We investigate this puzzling finding by modelling the finite
sample p-value distribution of the time series tests with local deviations from the
asymptotic p-value distribution. We find that the size distortions of the panel tests
can be explained as the cumulative effect of small size distortions in the time series
tests.
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Keywords
Error-in-rejection probability, Meta-analysis, Panel unit root tests